Proper planning can help you get the car of your choice and an auto loan that fits your budget. Read on as we reveal easy tips for getting a car loan that you can afford.
Set a Budget.
Before you start hunting for cars, decide how much you are willing to spend. While salespeople may give you an option of a long-term loan, it may not actually be within your budget. So, it’s important to determine your spending limit and (and stick to it).
Review Your Credit.
Make sure you check your credit report before applying for a car loan. This is because your loan approval and premiums depend on it. If you have a good credit score, you can get a lower interest rate. That means you’ll pay a low amount for your car, in terms of both total interest costs and monthly payments.
Shop Around for Lenders.
Before you walk into a car lot, consulting with several lenders of different types will give you a sense of the car loan options available to you. Auto dealerships offer multiple financing options and incentive programs. Direct lenders, such as a bank, credit union, or online lender, offer better financing deals than dealerships, in many cases. They often give you pre-approved loans and interest rates too.
Skip Unnecessary Insurance.
Sometimes, lenders may offer to include different types of insurance with your loans such as liability insurance, collision insurance, or credit insurance. You can choose to skip these options. But if you need any of these auto insurances, then ensure you compare offers from different sources, before adding them to your loan.
Avoid Prepayment Penalties.
Some lenders charge a prepayment penalty if you pay off your loan before the end of your loan term. Read the fine print of your auto loan contract before signing it to avoid incurring this penalty. Also, ensure that it grants you the flexibility to pay off your loan quickly without penalties.